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[Federal Register Volume 89, Number 245 (Friday, December 20, 2024)]
[Notices]
[Pages 104282-104284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30351]

[[Page 104282]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101923; File No. SR-DTC-2024-013]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the Guide to the DTC Fee Schedule To Revise Certain Fees 
Charged to Participants for Settlement Services

December 16, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 9, 2024, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II and III below, which Items have 
been prepared by the clearing agency. DTC filed the proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(2) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change would modify the Guide to the DTC Fee 
Schedule \5\ (``Fee Guide'') to revise certain fees charged to 
Participants for Settlement Services,\6\ as described in greater detail 
below.\7\
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    \5\ Available at www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf.
    \6\ Pursuant to Rule 2, Section 1, each Participant shall pay to 
DTC the compensation due it for services rendered to the Participant 
based on DTC's fee schedules. See Rule 2, infra note 7.
    \7\ Each capitalized term not otherwise defined herein has its 
respective meaning as set forth the Rules, By-Laws and Organization 
Certificate of DTC (the ``Rules''), available at www.dtcc.com/legal/rules-and-procedures.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposed rule change would modify the Fee Guide to revise 
certain fees charged to Participants for Settlement Services, as 
described below.
Overview
    DTC operates under a ``cost plus a low-margin markup'' pricing 
model. The markup is applied to recover development costs and operating 
expenses, and to accumulate capital sufficient to meet regulatory and 
economic requirements. DTC maintains procedures to control costs and to 
regularly review pricing levels against costs of operation. It reviews 
pricing levels against its costs of operation during the annual budget 
process.
    The budget is approved annually by the Board. DTC's fees are 
approved by the Board or management (pursuant to authority delegated by 
the Board), as applicable. When estimating expected revenues and costs, 
DTC typically uses historical, current, and expected usage and market 
trends to determine revenue outlook and apply current budgeted 
assumptions on costs. In addition to assessing the overall impact of 
fee changes at DTC, the Board also considers impacts of fee changes 
from an individual product/service category (e.g., Settlement Services) 
perspective, taking cost and capital considerations relating to a given 
category into account.
    After evaluation of DTC's short-term and long-term financial 
position in consideration of expected Participant activity, revenues, 
cost of funding, market volatility, and the financial markets more 
broadly, including considering impacts for each product/service 
category perspective, as more fully described below, DTC has determined 
that it should increase the overall amount it collects from 
Participants through fees. More specifically, the proposed rule change 
would increase certain fees relating to Settlement Services, to better 
align cost and revenue.
    Operating expense increases for DTC's Settlement Services are 
driven by compensation and contract inflation, IT risk mitigation, 
resiliency initiatives and infrastructure investments partially offset 
by efficiencies. Therefore, the proposed rule change would increase 
certain fees relating to book-entry delivery in the Settlement Services 
section \8\ of the Fee Guide to better align costs and revenue, as 
described below.
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    \8\ See Fee Guide, supra note 5.

Fee Revisions for Certain Settlement Services
Fee Increase for DTC Deliver Orders

    As background, a Participant may submit an instruction (``Deliver 
Order'') to DTC to make a Delivery \9\ of Eligible Securities via book-
entry to another Participant's account.\10\ DTC reduces the Deliverer's 
\11\ position and increases the Receiver's \12\ position without the 
need to move physical certificates. Deliveries can be made Delivery 
Versus Payment \13\ or as a Free Delivery,\14\ depending on the 
applicable Participant's delivery instructions provided in the Deliver 
Order.
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    \9\ See Rule 9(A), Rule 9(B), Rule 9(C) and Rule 9(D), supra 
note 7, and Settlement Service Guide (``Settlement Guide''), 
available at www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Settlement.pdf. DTC allows a Participant to settle securities 
transactions by making book-entry Deliveries to another 
Participant's account. DTC reduces the seller's position and 
increases the buyer's position without the need to move physical 
certificates. See Settlement Guide at 5.
    \10\ See Rule 9(B), supra note 7.
    \11\ Pursuant to Rule 1, the term ``Deliverer,'' as used with 
respect to a Delivery of a Security, means the Person which Delivers 
the Security. See Rule 1, supra note 7.
    \12\ Pursuant to Rule 1, the term ``Receiver,'' as used with 
respect to a Delivery of a Security, means the Person which receives 
the Security. See id.
    \13\ Pursuant to Rule 1, the term ``Delivery Versus Payment'' 
means a Delivery against a settlement debit to the Account of the 
Receiver, as provided in Rule 9(A) and Rule 9(B) and as specified in 
the Procedures. See Rule 1, supra note 7.
    \14\ Pursuant to Rule 1, the term ``Free Delivery'' means a 
Delivery free of any payment by the Receiver through the facilities 
of the Corporation, as provided in Rule 9(B) and as specified in the 
Procedures. See id.
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    When a Participant submits a Deliver Order during DTC's day 
settlement cycle, the delivering Participant is charged a fee (``Day 
Deliver Order Fee'') of 54 cents, per deliver. When a Participant 
submits a Deliver Order during DTC's night settlement cycle,\15\ the 
charge is 17 cents, per deliver (``Night Deliver Order Fee''). The 
Night Deliver Order Fee is less than the Day Deliver Order Fee because 
DTC is encouraging earlier submission of transactions by Participants, 
which results in more efficient settlement processing by increasing the 
volume of transactions processed in the night-cycle, which, in turn, 
lessens the burden on the intraday settlement processing.\16\
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    \15\ A Deliver Order input on the day prior to settlement. A 
reduced rate is charged for Night Deliver Order transactions. See 
Settlement Guide, supra note 9.
    \16\ See Securities Exchange Act Release No. 84768 (Dec. 10, 
2018), 83 FR 64401 (Dec. 14, 2018) (SR-DTC-2018-011).
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    If a Participant submits a Deliver Order and elects for the Deliver 
to be

[[Page 104283]]

tracked through DTC's income tracking systems, specifically the stock 
loan income tracking system \17\ or the repurchase agreement (``Repo'') 
tracking system,\18\ then the Deliver is charged an additional 18 
cents, regardless of time. This fee is designated in the Fee Guide as 
the ``Repos, stock loans and returns'' fee (``Tracking Fee'').
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    \17\ In a stock loan agreement, the lender of a Security is 
entitled to recover from the borrower any income distributions paid 
on the loaned Security. The stock loan income tracking system allows 
DTC to track the lender's (Deliverer's) position on the Securities. 
The stock loan income tracking system tracks cash dividend and 
interest payments relating to Deliver Orders submitted using certain 
reason codes for stock loan transactions, as described in the DTC 
Corporate Actions Distributions Service Guide (``Distributions 
Guide''). See Distributions Guide, available at www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Service-Guide-Distributions.pdf, at 37-38, for additional information relating to 
stock loan transactions and the related reason codes.
    \18\ A Repo is an agreement between two parties that allows the 
seller of Securities to later repurchase them at an agreed-upon 
price. The seller usually retains the right to periodic income 
distributions. However, since the Securities will not reside in the 
seller's account on record date, the seller would not be credited 
the periodic principal and income distributions paid on the 
Securities. To recover these entitlements, the seller must claim the 
Repo buyer. DTC's Repo Tracking System automates claims of these 
entitlements by tracking the Repo transactions (Deliveries) relating 
to Deliver Orders submitted using certain reason codes designated 
for Repo transactions and adjusting the entitlement payments 
accordingly on payable date. See Distributions Guide, id. at 39-40, 
for additional information relating to Repo transactions and related 
reason codes.
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    The Receiver of a Deliver is charged 11 cents (``Receive Fee), 
regardless of time, per receive.\19\
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    \19\ See Fee Guide, supra note 5, at 18.
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    Pursuant to this proposed rule change, DTC would update the Fee 
Guide to reflect the following fee increases: (1) Day Deliver Order Fee 
from 54 cents to 68 cents per delivery, (2) Night Deliver Order Fee 
from 17 cents to 21 cents per delivery, (3) Tracking Fee from 18 cents 
to 22 cents per tracking, and (4) Receive Fee from 11 cents to 14 cents 
per receive.
    The proposed fee changes reflect an amount that would facilitate 
DTC's ability to maintain a cost plus low-margin markup model, as 
discussed above, with respect these Settlement Services.
Fee Increase for DTC Deliveries and Receives to and From NSCC's CNS 
System
    In addition to the Deliver Orders described above, DTC also 
completes Deliveries of Securities transactions cleared by its 
affiliate, the National Securities Clearing Corporation (``NSCC''), 
through the NSCC Continuous Net Settlement (``CNS'') system. Such 
Deliveries are processed at DTC as Free Deliveries.\20\ Similarly, DTC 
also processes Free Deliveries relating to NSCC's Automated Customer 
Account Transfer Service (``ACATS'').\21\
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    \20\ See Settlement Guide, supra note 9.
    \21\ Id.
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    Both the delivering and receiving Participants of CNS Deliveries 
and ACATS Deliveries are charged 17 cents, per delivery (``CNS/ACATS 
Delivery Fee'').\22\ Pursuant to this proposed rule change, DTC would 
increase the CNS/ACATS Delivery Fee from 17 cents to 21 cents.
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    \22\ See Fee Guide, supra note 5.
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    As with the proposed changes to the other Delivery and Receive fees 
described earlier, the proposed fee change to the CNS/ACATS Delivery 
Fee is designed to enable DTC to offset its associated costs and 
expenses for this Settlement Service while maintaining low-margin 
markup, consistent with its pricing model.
Participant Outreach
    DTC has conducted ongoing outreach to each Participant to provide 
them with notice of the proposed changes and the anticipated impact for 
the Participant. The impact of the proposed changes was provided to 
Participants using year-to-date, July 2024 annualized data. As of the 
date of this filing, no written comments relating to the proposed 
changes have been received. The Commission will be notified of any 
written comments received.
Implementation Timeframe
    DTC would implement this proposal on January 1, 2025. To that 
effect, a legend will be added to the Fee Guide stating there are 
changes that have become effective upon filing with the Commission but 
have not yet been implemented. The proposed legend also would include a 
date on which such changes would be implemented and the file number of 
this proposal, and state that, once this proposal is implemented, the 
legend would automatically be removed from the Fee Guide.
2. Statutory Basis
    DTC believes this proposal is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to a 
registered clearing agency. Specifically, DTC believes the proposed 
changes to modify fees charged to Participants for the Settlement 
Services described above are consistent with Section 17A(b)(3)(D) of 
the Act \23\ and Rule 17ad-22(e)(23)(ii),\24\ promulgated under the 
Act, for the reasons described below.
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    \23\ 15 U.S.C. 78q-1(b)(3)(D).
    \24\ 17 CFR.17ad-22(e)(23)(ii).
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    Section 17A(b)(3)(D) of the Act requires, inter alia, that the 
Rules provide for the equitable allocation of reasonable dues, fees, 
and other charges among participants.\25\ DTC believes the proposed 
rule change to revise the above-described fees charged to Participants 
for Settlement Services would provide for the equitable allocation of 
reasonable fees. Because all Participants subject to these fees would 
be charged the same increase, and those increases are directly 
proportional to the Participants' use of the applicable DTC service, 
DTC believes the fees continue to be equitably allocated.
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    \27\ 15 U.S.C. 78q-1(b)(3)(D).
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    DTC also believes that the proposed fees will continue to be 
reasonable under the described changes. As described above, DTC's fees 
are cost-based, plus a low-margin markup to recover development costs 
and operating expenses, and to accumulate capital sufficient to meet 
regulatory and economic requirements. The proposed fee changes are 
simply designed to better align to DTC's projected operating costs and 
expenses relating to these specific Settlement Services. For this 
reason, DTC believes that the proposed fee changes, as described above, 
are reasonable and consistent with Section 17A(b)(3)(D) of the Act.\26\
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    \26\ Id.
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    Rule 17ad-22(e)(23)(ii) under the Act \27\ requires DTC to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to provide sufficient information to 
enable participants to identify and evaluate the risks, fees, and other 
material costs they incur by participating in the covered clearing 
agency. The proposed fees would be clearly and transparently published 
in the Fee Guide, which is available on a public website,\28\ thereby 
enabling Participants to identify the fees and costs associated with 
participating in DTC. As such, DTC believes the proposed rule change to 
update the Fee Guide to reflect the proposed fee changes is consistent 
with Rule 17ad-22(e)(23)(ii) under the Act.\29\
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    \27\ 17 CFR 240.17ad-22(e)(23)(ii).
    \28\ See supra note 5.
    \29\ 17 CFR 240.17ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition

    The proposed rule change may impact competition and that impact may 
be a burden because it would result in increased fees paid by 
Participants, as described above. However, DTC does

[[Page 104284]]

not believe such a burden would be significant because the fees would 
be charged equally to all Participants that utilize the applicable 
Settlement Services and would merely reflect the Participants' related 
activity at DTC. Regardless, DTC believes any burden would be necessary 
and appropriate in furtherance of the purposes of the Act, as permitted 
by Section 17A(b)(3)(I) of the Act.\30\
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    \30\ 15 U.S.C. 78q-1(b)(3)(I).
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    DTC believes any such burden would be necessary because the 
proposed fee increases would better align the fees with DTC's 
associated costs, helping DTC to achieve and maintain its net income 
margin. Meanwhile, DTC also believes that any such burden would be 
appropriate because the fees would continue to be equitably and 
reasonably allocated among all Participants, as described above.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, they would be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at sec.gov/regulatory-actions/how-to-submit-comments. General questions regarding 
the rule filing process or logistical questions regarding this filing 
should be directed to the Main Office of the Commission's Division of 
Trading and Markets at [email protected] or 202-551-5777.
    DTC reserves the right to not respond to any comments received.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \31\ of the Act and paragraph (f) \32\ of Rule 19b-4 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-DTC-2024-013 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to file number SR-DTC-2024-013. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of DTC and on DTCC's 
website (www.dtcc.com/legal/sec-rule-filings). Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to File Number SR-DTC-2024-013 and should be submitted on or 
before January 10, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30351 Filed 12-19-24; 8:45 am]
BILLING CODE 8011-01-P
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